Posted at 3:45 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Here is intervention #5 which happens to also be bomb #5

Fed, major central banks slash rates
More moves expected in effort to stabilize financial system
By William L. Watts, MarketWatch
Last update: 10:11 a.m. EDT Oct. 8, 2008

WASHINGTON (MarketWatch) — The U.S. Federal Reserve and other major central banks moved in concert Wednesday to slash key interest rates as part of an ongoing effort to quell financial turmoil that has threatened to flatten the international economy

In moves announced simultaneously before the opening of U.S. markets, the Fed cut its key lending rate by half a percentage point, to 1.5%.

The European Central Bank trimmed its key rate to 3.75% from 4.25%, and the Bank of England cut its benchmark rate to 4.5% from 5%. The Bank of Japan sat out the move but issued a statement backing the action.

The Bank of Canada, the Swiss National Bank and the Swedish Riksbank cut rates as well.
The move was hailed by economists, but did little to provide lasting support for tumbling equity markets. European indexes rebounded strongly but soon returned to the downside. U.S. stock index futures spiked higher, but then dove back into negative territory.

More…

Libor rises and the credit market continues to be super glued.

Equity selling is violently oversold but rallies have no legs.

The US dollar rally has no fundamental legs.

The problems in the US exceed economic problems anywhere.

Great Britain is simply another state of the USA, at least in this administration.

Euroland has problems but they will continue to lie and hide.

If you do not have cash on hand, gold in the mayo jar, distance between you and your financial agents, paper certificates or direct registration book entry you are simply a financial disaster waiting to happen.

The Big Boy of the Money Guys, Paulson, is following up on the President and Chairman of the Fed. Let’s see if he gets the same or different market treatment.

Gold is going to $1200 and $1650.

The US dollar will trade at .72, .62, and .52.

The SEC has put the onus on US brokers involved in the Jitney practice to see that short sales are properly delivered in 3 days. Massive amounts of subpoenas have gone out to enable a review of this practice. Subpoenas have also gone out to funds internationally via their US jitney brokers to review their position and pattern recognition between various entities. The sun is rising on the shadows. Those that hide in the dark to injure for profit cannot exist in the light.

Posted at 10:24 PM (CST) by & filed under Jim's Mailbox.

Hello Jim,

Have you ever heard the discussion about Comex defaulting on Gold? Would you be able to share your opinion on the topic? The questions are being brought up on CNBC. A video on the story is below

Regards,
CIGA JB Slear

Click here to view the video

Dear JB,

There was a time that I would have dismissed that idea as manic. Now it is a different story.

The cash market in anything does not command the price. The leveraged market is most powerful where prices are concerned.

I see the tight gold bullion cash market as the one that causes the short side significant bankruptcy rather than the violent paper gold market as the “Out of Control” banking problem ignites unstoppable rockets that blast the price of gold to unexpected levels in a straight line. The price violence you see now is because of this cash market versus bullion market relationship.

Today, insolvency in the hundreds of billions can happen anywhere. There was a day when the guarantee of the clearing house, the exchange itself ,and the member’s personal wealth that stands behind the paper gold contracts was more than satisfactory for comfort. In today’s world of monumental insolvency nothing can be considered sacred in terms of financial guarantees by market participants or orderly prices.

The bottom line is never say never.

Regards,
Jim

Jim,

The $700 billion didn’t work (surprise!). Libor is heading up again. Game over!

CIGA Pedro

Libor for Overnight Dollar Loans Jumps as Credit Freeze Deepens
By Lukanyo Mnyanda and Andrew MacAskill

Oct. 7 (Bloomberg) — The cost of borrowing in dollars overnight in London jumped as U.K. lenders held talks with the government on emergency funding and Iceland nationalized its second-biggest bank amid an unprecedented credit squeeze.

The London interbank offered rate, or Libor, that banks charge each other for such loans rose 157 basis points to 3.94 percent today, the British Bankers’ Association said. The corresponding rate for euros climbed 22 basis points to 4.27 percent

More…

Posted at 6:27 PM (CST) by & filed under General Editorial.

Control |kənˈtrōl|

noun
1 the power to influence or direct people’s behavior or the course of events : the whole operation is under the control of a production manager | the situation was slipping out of her control.
• the ability to manage a machine or other moving object : he lost control of his car | improve your ball control.
• the restriction of an activity, tendency, or phenomenon : pest control.
• the power to restrain something, esp. one’s own emotions or actions : give children time to get control of their emotions.
• (often controls) a means of limiting or regulating something : growing controls on local spending.
• a switch or other device by which a machine is regulated : the volume control.
• the place where a particular item is verified : passport control.
• the base from which a system or activity is directed : communications could be established with central control | mission control.
• Bridge a high card that will prevent opponents from establishing a particular suit.
• Computing short for control key .

Things are out of control.

The draconian action taken by the Federal Reserve today was their entry into locked credit markets that are defined by the Libor Rate and Rate on Commercial Paper. This action prevented the triggering of a total implosion of all markets, with the exception of gold, the currency of ultimate final refuge.

“Out of Control” can be defined as a day the Dow crashes 500 points when the Chairman of the Federal Reserve and the President of the United States spoke on national TV, right on the heels of the much touted Bailout Bill, combined with the entrance of the Fed into the OTC derivative business with no binding limits set on the high side of this initiative.

This is a downward spiral in which now four major interventions have failed.

The only case study in History is the Weimar experience. You cannot compare this to the credit lockup of Livermore and JP Morgan times. Arguments against that point are hollow.

What I find inexplicable is that the “Uptick Rule for Short Selling” has not been reinstated. That rule is more powerful than even banning short selling. These people are not STUPID so one can only assume this “Out of Control” situation is not a surprise.

Do not be surprised by additional intervention failures, gold taking out $1000 on the 3rd try, three consecutive TIC reports failing to support the Trade Deficit, a Federal budget deficit of unprecedented proportions, a dollar trading at .72, .62 and .52 and gold trading at and above $1650.

I told you in the middle of the recent dismal state of mind many gold investors were in that I never felt better about gold. That may have sounded nuts to some of you.

I now say that I have never felt more confident about gold and silver juniors with good property, good management and money in the bank.

Jim Sinclair’s Commentary

Here is an example of the struggle between paper gold and the bullion gold market. This means violence beyond your wildest expectations with FINANCIAL FAILURES ON BOTH SIDES.

Bullion lending by central banks all but dries up
By Javier Blas in London , Financial Times, 7 Oct 2008

Central banks have all but stopped lending gold to commercial and investment banks and other participants in the precious metals market, in a move that on Tuesday sent the cost of borrowing bullion for one-month to more than twenty times its usual level.

The one-month gold lease rate rocketed to 2.649 per cent, its highest level since May 2001 and significantly above its five-year average of 0.12 per cent, according to data from the London Bullion Market Association.

Gold lease rates for two, three and six months and for a year also jumped to levels not seen in the last seven years.

Traders said the jump reflects the fact that central banks – mostly European – have almost completely stopped lending gold in the last few days and are not rolling forward old leases after maturity. This is because of fears that some borrowers might not repay their bullion loans if they are engulfed by the financial crisis.

“A number of central banks have been cutting back on their gold lending,” said Tom Kendall, a precious metals strategist at Mitsubishi in London.

More…

Jim Sinclair’s Commentary

The US dollar cannot stage any kind of a bull market with this type of supply out there.

Fed to buy massive amounts of short-term debt
Tuesday October 7, 10:33 am ET
By Jeannine Aversa, AP Economics Writer

Fed in bold move to thaw credit markets says it will buy massive amounts of short-term debt

WASHINGTON (AP) — The Federal Reserve announced Tuesday a radical plan to buy massive amounts of short-term debt in a dramatic effort to break through a credit clog that is imperiling the economy.

The Federal Reserve, invoking Depression-era emergency powers, will buy commercial paper, a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls.

In more normal times, about $100 billion of these short-term IOUs were outstanding at any given time, sold by companies to buyers that included money market mutual funds, pension funds and other investors. But this market has virtually dried up as investors have become too jittery to buy paper for longer than overnight or a couple days.
That has made it increasingly difficult and expensive for companies to raise money to fund their operations. Commercial paper is a way of borrowing money for short periods, typically ranging from overnight to less than a week.

More…

Jim Sinclair’s Commentary

If regulators don’t care to apply their regulations, maybe God will.

Bonfire of the hedgies
Only the strongest will survive as the global crisis lashes the funds sector
Kate Walsh

In happier times, the bronzes in the window of WH Patterson’s gallery in London’s Mayfair would have been quickly snapped up. Their titles – Lioness Attacking, Lioness Stalking and Cheetah I and II – would have appealed to the hedge-fund managers who work in the area and fancy themselves as financial-market predators.

To them, the asking price of £10,000-plus would have been little more than small change; but those days have gone and the hunters are rapidly becoming the hunted.

A handful of managers in London and New York were forced last week to liquidate funds, including the flagship funds at MKM Longboat and Powe Capital, as investors demanded their money back. It is only the beginning.

Experts are predicting a 30% reduction in the hedge-fund industry – there are roughly 10,000 funds worldwide, and the industry is worth approximately $2 trillion. One broker said: “Small firms are bleeding. Assets are being sold off, investors are redeeming money and the managers are scuttling off to work somewhere else.”

More…

Jim Sinclair’s Commentary

Please note this extremely important set of facts.

Notice the words EQUITY LOST FOREVER and tell me what value to maturity means. I believe that it means nonsense, and the newest attempt at spinning worth-less to worth-full which will remain worth-less FOREVER.

The largest fabrication is that the worthless paper now being bought to an infinite amount by US taxpayers will someday return to significant value. They simply will not.

US Real Estate: From Goldmine To Money Pit – Mortgage Backed Securities and Derivatives are Flawed and Failing
by Kenn spacefield

The mortgage debt problem is simple really, it has been a total mis-appropriation of equity. The equity lost on flat screen TV’s, boats, new cars, vacations, and other living expenses; is equity lost forever. This loss of equity spent on consumer goods and expenses is a pyramid scheme of hyper-capitalism that is flawed and failing. Equity not spent on the property the equity comes from, is equity lost forever, a mis-appropriation of funds, and inappropriate; it is a failing economic model.

More…

Posted at 12:16 PM (CST) by & filed under Guild Investment.

Dear CIGAs,

Mainstream media outlets are devoting more airtime and front page space to the developing banking and financial system crises.  There were two articles this weekend that may be useful.  One article is for those who are interested in the evolution of the housing market’s problems, and another about the banking system’s inability and/or unwillingness to lend.

From the October 5, 2008 NY TIMES:
Pressured to Take More Risk, Fannie Reached Tipping Point
By: CHARLES DUHIGG
http://www.nytimes.com/2008/10/05/business/05fannie.html?partner=rssnyt&emc=rss

From the October 4, 2008 THE ECONOMIST:
Blocked Pipes
http://www.economist.com/displaystory.cfm?story_id=12342237

We recommend the Blocked Pipes article as it clearly explains the concerns that we have had for years about the banking system of the world.  After reading the Blocked Pipes article, you can see why we remain pessimistic about a rapid recovery of the world banking system.  We strongly recommend that readers contact us, about the security of the banking institutions where they have their assets.  Our attorneys have carefully analyzed the legal language of many institutions, and we have strong opinions about which banks and which areas within banks provide the most safety for investors.  We will be happy to discuss your situation with you and suggest alternatives for you.

Albeit a little late, it appears that the problems within the global financial system have captured the interest of the general public, not just investors.  Markets are often held captive to fear and greed.  Fear has clarified the public’s attention.  Those who may have had a casual interest in how the world of investing worked before are becoming convinced they need to understand what happened, what is happening, how it might affect them, and what steps if any should they take.

The markets are based on psychology, and understanding the public psyche is important to successful investing.  Since people still rely on the media for much of their information, we believe is valuable to monitor.

Thanks for listening, and please feel free to contact us if we can be of assistance.

Monty Guild and Tony Danaher
www.GuildInvestment.com

Posted at 9:54 AM (CST) by & filed under General Editorial.

Dear CIGAs,

Today the Fed entered the off balance sheet credit default market and plans to buy unsecured debt instruments in order to cure the problems caused by off balance sheet credit default derivative buying in the form of non-performing failed counterparty credit default derivatives. This appropriately named toxic paper will be purchased to an infinite degree.

The Fed does the same to cure the same.

The Fed actions today declare the bailout bill a non-functioning pile of pork.  This infinite production of paper dollars will kill the dollar

Gold will trade at or above $1650.

The Dow is thumbing its nose at the infinite amount of money being dropped by rising 150 points and coming back to even.

Modern day Weimar here we come!

Jim

Posted at 2:02 AM (CST) by & filed under General Editorial.

Dear Friends,

Please understand that the Fed reacts to circumstances rather than acting before potential problems happen.

If the Fed hadn’t taken the rather strange action they took today by becoming OTC derivative dealers themselves this would have been the day the USA banking system imploded.

Watch Libor rates to signal the point of detonation.

Circumstances appear as if there were many problem Angels dancing on top of a pin that is being balanced on the nose of just those people who created the problem in the first place.

An implosion of the banking system is coming, which means a bank holiday will occur.

You now must have enough cash in hand to last a month or two.

If you have not distanced yourself from financial agents then you have a financial death wish.

If you have NOT made absolutely sure that your custodian account is a real custodial- ship you are probably in for a surprise.

I took a call yesterday from a mature lady who told me she feels her money market fund that is only in Treasuries will not pay her out. They did tell her they intend to in seven days. I asked her to call me back in eight days. How does she know that this money market fund is not in OTC derivatives based on the movement of Treasuries?

I do not want you to make that call to me.

If you can retire from your  retirement program at some reasonable discount do it NOW.

This is it and it is NOW. Gold is going to $1200 and $1650. The US dollar rally has NO fundamental legs.

Why are so many of you sitting there like a deer caught in the headlights? Protect yourself and do it TODAY!

Respectfully,
Jim

Posted at 5:37 PM (CST) by & filed under General Editorial.

Dear CIGAs,

  1. Gold is the ultimate currency when others fail as a store house of values.
  2. Gold has no liability attached to it.
  3. Gold is universally fungible.
  4. Gold is an appreciating asset on the balance sheets of central banks..
  5. Gold will trade at $1200 and $1650.
  6. Of course gold bottomed on its first break from $1033, but I only say such things once.
  7. The third try for above $1000 is being set up now.
  8. Have you protected yourself?

Your friend,
Jim

Posted at 5:35 PM (CST) by & filed under Jim's Mailbox.

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There is no doubt the US dollar is going to hit .52 in the coming years. Is there a chance the physical market is breaking or pressuring the Comex Paper market?

Alex

Dear Alex,

The answer to your question is YES. Add to that the fact that gold is the ultimate currency, not paper.

Regards,
Jim

Dear Jim,

I stand in awe to imagine 16000+ bank owned properties from foreclosures in one city alone, with 12000+ coming in pre-foreclosure! It is truly incredible. This amounts to HUGE selling pressure on real estate in coming months and years!

When gold is over $10,000 and estimated tax collections turn positive I will have to buy one in Arizona or Florida, along with an airplane!

Best,
CIGA Big Tatanka

Dear CIGA Big T,

I agree on one thing. I will buy an A-10 Wart-hog. The early models are in for decommissioning in two years.

All the best,
Jim